The annual gift tax exclusion for 2021 is $15,000. This means that someone can give $15,000 to any person in a calendar year ($30,000 for a married couple) without having to file a federal gift tax return and without it counting toward their lifetime exemption amount. But what if you want to pay for your grandchild’s education? Does that count towards the federal gift tax exemption, or is tuition exempt from the gift tax?
Tuition is exempt from the gift tax and grandparents or other gifters do not have to file a gift tax form 709 when money is paid directly to a school, even if the amount exceeds the $15,000 annual exclusion amount. Tuition payments made directly to a school are exempt from gift taxes and the Generation-Skipping Transfer Tax.
• Payment must be made directly to the school
• Colleges, nursery schools, private grade schools and private high schools qualify
• Tuition pre-payments can be made as soon as the person is admitted to the school
• 529 college savings plan gifts ARE subject to the $15,000 gift exclusion rule
• You can donate five years’ worth of exclusions and gift $75,000 to a 529 at one time
• Tuition payments do not count towards your $11.58 million lifetime gift tax exemption
• Any money that is gifted for college expenses including books, supplies or room and board costs do not qualify for the gift tax exclusion
Providing for your grandchildren’s education is an investment in their future. Do you have questions about gift taxes and estate planning? Our experienced estate planning lawyers in Lombard, Illinois can advise you on the best options to protect your assets and loved ones. To talk to an estate planning attorney contact the Estate & Probate Legal Group at 630-864-5835.
We provide legal services in Cook, DuPage, Kane, Lake, and Will counties.